Almost everything you own and use for personal or investment purposes
is a capital asset. Examples include a home, personal-use items like
household furnishings, and stocks or bonds held as investments. When
you sell a capital asset, the difference between the basis in the
asset and the amount you sell it for is a capital gain or a capital
loss. Generally, an asset's basis is its cost to the owner, but if
you received the asset as a gift or inheritance, refer to Topic 703 for information about your basis. You have a capital gain
if you sell the asset for more than your basis. You have a capital
loss if you sell the asset for less than your basis. Losses from the
sale of personal-use property, such as your home or car, are not deductible.

Capital gains and losses are classified as long-term or short-term.
If you hold the asset for more than one year before you dispose of
it, your capital gain or loss is long-term. If you hold it one year
or less, your capital gain or loss is short-term. To determine how
long you held the asset, count from the day after the day you acquired
the asset up to and including the day you disposed of the asset.

Report most sales and other capital transactions and calculate
gain or loss on Form 8949 (PDF), Sales
and Other Dispositions of Capital Assets, then summarize capital
gains and deductible capital losses on Form 1040, Schedule D (PDF), Capital Gains and Losses. If you
have a net capital gain, a lower tax rate may apply to the gain than
the tax rate that applies to your ordinary income. The term "net capital
gain" means the amount by which your net long-term capital gain for
the year is more than your net short-term capital loss for the year.
The term "net long-term capital gain" means long-term capital gains
reduced by long-term capital losses including any unused long-term
capital loss carried over from previous years. The tax rate on most
net capital gain is no higher than 15% for most taxpayers. Some or
all net capital gain may be taxed at 0% if you are in the 10% or 15%
ordinary income tax brackets. However, a 20% rate on net capital gain
applies in tax years 2013 and later to the extent that a taxpayer’s
taxable income exceeds the thresholds set for the new 39.6% ordinary
tax rate ($406,750 for single; $457,600 for married filing jointly
or qualifying widow(er); $432,200 for head of household, and $228,800
for married filing separately). For more information, refer to Publication 505, Tax Withholding and Estimated Tax.

There are a few other exceptions where capital gains may be taxed
at rates greater than 15%:

The taxable part of a gain from selling section 1202 qualified
small business stock is taxed at a maximum 28% rate.

The portion of any unrecaptured section 1250 gain from selling
section 1250 real property is taxed at a maximum 25% rate.

Note: Net short-term capital gains are subject to taxation
as ordinary income at graduated tax rates.

If you have a taxable capital gain, you may be required to make
estimated tax payments. Refer to Publication 505, Tax Withholding
and Estimated Tax for additional information.

If your capital losses exceed your capital gains, the amount of
the excess loss that you can claim on line 13 of Form 1040 to lower
your income is the lesser of $3,000, ($1,500 if you are married filing
separately) or your total net loss shown on line 16 of the Form 1040, Schedule D (PDF), Capital Gains
and Losses. If your net capital loss is more than this limit,
you can carry the loss forward to later years. You may use the Capital
Loss Carryover Worksheet found in either Publication 550, Investment Income and Expenses, or the Form 1040, Schedule D Instructions (PDF), to figure the
amount you can carry forward.

Additional information on capital gains and losses is available
in Publication 550, Investment Income and Expenses, and Publication 544, Sales and Other Dispositions of Assets. If you sell your main home, refer to Topics 701 and 703, and Publication 523, Selling
Your Home.